The probe follows a complaint by the Democratic Alliance after recent Mail & Guardian articles about how individuals connected to the ruling party benefited handsomely from Coral Lagoon, a consortium that acquired shares in Capitec Bank in 2006 with the help of R285-million loan from the Industrial Development Corporation.

In February this year the consortium sold sufficient shares to the Public Investment Corporation to pay off all debts associated with the original purchase, thanks to strong growth in the Capitec stock price.

At the centre of the probe will be the involvement of Johannesburg mayor Parks Tau and his wife, Pilisiwe.

Pilisiwe has a 1% stake in the Coral Lagoon worth about R10-million, while Regiments Capital, a company instrumental in assembling the Coral Lagoon consortium, won a lucrative contract to manage the Johannesburg council's R2-billion "sinking fund" when Tau was the political head of the mayoral committee in charge of financial strategy and economic development.

One of Regiments' chief executives, Litha Nyhonyha, has conceded that the company makes donations to the ANC.

Tau denied any conflict of interests and referred the matter to Madonsela's office and the city's integrity commission for investigation.

In the latest development, reported in the edition of the Mail & Guardian newspaper to be published on October 19, the City of Johannesburg stands accused of rigging the “sinking fund” tender in favour of Regiments.

It has emerged that Johannesburg recently chose Regiments to perform the fund management contract for another five years – following a tender process seemingly tailored for it as the incumbent.

Although Regiments’ bid was arguably the most expensive, it was the only firm left standing after each of its 11 competitors, including large banks and specialist fund managers, wasdisqualified on a technicality or for lacking "track record".

Denying any conflict of interests, Tau referred the matter to Madonsela’s office and the city’s integrity commission for investigation.

The deal was simple. The consortium bought an empowerment stake in Capitec using funds provided by the IDC.
Later, exploiting strong growth in the Capitec stock price, it sold just enough to the PIC to pay off all debt associated with the original purchase.

The ANC and some well connected individuals stand to benefit from the value of the remaining shares – over R950-million – in another instance of the ruling party acting as both player and referee. The party has hit flak in the past for investing through its front company, Chancellor House, in areas where government has a say.

The consortium is named Coral Lagoon after the shelf company it uses to house its interest in Capitec. Coral Lagoon's second-largest beneficiary is the Batho Batho Trust, founded by ANC leaders in 1992.

Despite attempts to dissociate itself from the ANC, Batho Batho is a major sponsor of the party. A spokesperson would not say whether Batho Batho would transfer proceeds from the Capitec windfall to the ANC, calling it a "hypothetical question".

Batho Batho holds 20% of Coral Lagoon, giving it a net gain of Capitec shares now worth about R190-million.

Other significant stakes are held by the companies Keabetsoe Holdings (32%) and Regiments Capital (18%), both of which appear to have strong links to the ANC treasury.

Gugu Mtshali, deputy president Kgalema Motlanthe's life partner, gained shares now worth R9.5-million. She worked for the ANC treasury when Coral Lagoon was formed.

The PIC's role is particularly contentious, because it bought the shares only to warehouse them for onward BEE sale. This echoes its 2004 warehousing of Telkom shares to assist the politically connected Elephant Consortium that consisted of close associates of then-president Thabo Mbeki.

The warehousing allowed Coral Lagoon to gain hugely from an investment for which it paid nothing. But the long-term benefit to the PIC and its customers – government employees, whose pensions it invests – is not as clear.

The IDC and PIC both denied politics played a role, saying they acted within their mandate of supporting BEE while ensuring decent returns.

Coral Lagoon said in a statement: "This transaction can be seen as one of the most successful BEE transactions in South Africa as Coral Lagoon now has an unencumbered holding in Capitec that pays regular dividends."

Capitec said it had found both the IDC and PIC "professional" in their dealings and that it had been un-aware the ANC might benefit.